Alcoa (NYSE: AA) started off the earnings season for the Dow Jones Industrials in a surprisingly positive manner. Analysts were generally looking for revenues of $5.77 billion at the mean, and Alcoa reported $6.0 billion. It represented 1% top line growth against the prior year and fractional growth over the fourth quarter, which was impressive given a 9% drop in realized aluminum prices year-to-year. The stock was up 5.4% after hours Tuesday as a result, and the Industrial Select Sector SPDR (NYSE: XLI) was plus 0.7% post the close. Operational expectations were at the opposite end of the spectrum, as evidenced by Alcoa’s 2.9% decline Tuesday, before reporting its results, and by the XLI’s 2% fall.

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Temper Enthusiasm Post Alcoa

Before we get too excited about the quarterly result, though, I think we would be wise to consider the creep of global economic deterioration as the quarter progressed. While economic recession remains suspect, proclaiming all’s well on Alcoa’s news may likewise be premature. Indeed, I think it is. And even if it weren’t, Iran is about to happen, but that is supposedly not forecastable according to Wall Street. Yet, Iran just imposed “counter sanctions”, cutting off petroleum exports to starving Spain and Greece, and threatened to cut off Italy and Germany before the west’s own sanctions take effect in early July. It’s clear, at least to me, that the situation is finally coming to a head, with a powder keg now tightly squeezed between American warships and the Iranian coastline, just waiting for its spark.

Alcoa’s earnings per share also exceeded expectations, with income from continuing operations reaching $0.10 a share, against analysts’ consensus expectations for a loss of $0.04, based on Yahoo Finance’s tally. Still, you’ll find those looking to extract from Alcoa’s results pointing more to revenues than earnings, as they better reflect industry fundamentals. As we move down the income statement to the bottom line, Alcoa’s results increasingly reflect its gained efficiencies of operation.

Some would inspect Alcoa’s market segment revenues against the prior year, but the prior quarter comparison should better reflect the changes in economic health we are beginning to see, barring seasonal influences. In that regard, Alcoa saw industrial product growth of 14%, 13% increased demand from automotive, 11% more from packaging, with commercial transportation revenues up 11%. Alcoa and other materials players certainly have global development going for them as an offset against regional cyclical swings.

I would have to manufacture a negative interpretation of these numbers, as they were impressive and surely the reason for the stock’s rise after hours. But how well do they capture what could be developing in manufacturing, as seen in recent data review. How well do they reflect apparent European recession contagion into our market? How well do they reflect consumer concerns and the timid employment situation? How well do they measure the nascent stumble in housing? I say not well, and so I warn investors and econo-watchers to temper their enthusiasm today.

The shares of major industrials and the broader market look to break their slide Wednesday, and it is welcomed here but not expected to hold long based on my economic observations. Caterpillar (NYSE: CAT), Deere & Co. (NYSE: DE), General Electric (NYSE: GE), General Motors (NYSE: GM) and the SPDR Dow Jones Industrial Average (NYSE: DIA) are all looking higher by a point or more Wednesday morning. It may serve as a blessing for some with a nose to the change I smell, a chance to take capital back.

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